Application of Management Accounting Techniques
MAC3701
ASSIGNMENT 01 SEMESTER 01 2023
QUESTION 1
Use the following information to answer this question:
Neptune (Pty) Ltd (“Neptune”) manufactures and sells two types of energy drinks, namely:
The More-Joy (“MJ”) and Kick-On (“KO”). The following information is for the 2023 financial
year. Neptune’s financial statements are prepared using the absorption costing system,
valuing all its inventory items using the first-in-first-out (FIFO) method and having a 31
December financial year-end.
· The report from the storage manager indicated that there were 60 000 units (at R15
per unit) and 62 500 units (at R18 per unit) of MJ and KO respectively as closing inventory for
the financial year 2022.
· The budgeted selling prices are R20 and R25 per unit of MJ and KO respectively.
· The sales manager budgeted sales volumes for the 2023 financial year to be 300
000 and 270 000 units of MJ and KO respectively.
· The production manager stated that the 2023 budget production units for MJ should
be 6 times more than the 2022 closing inventory and for KO 480% of the 2022 closing
inventory.
· The total budgeted fixed costs for the 2023 financial year are reflected in the table
below:
Details R
Production line batch set-up cost 950 000
Rental of factory premises 750 000
Permanent manufacturing staff salaries 700 000
Depreciation of manufacturing machinery 400 000
Selling and administration 140 000
Total 2 940 000
· The fixed manufacturing overheads (“FMO”) are allocated to products based on the
machine hours it takes to produce each unit. It takes 15 machine minutes and 10 machine
minutes to produce a unit of MJ and KO respectively. It is budgeted that all manufacturing
overhead costs will be absorbed.
,· The variable costs per unit are R10 and R12 for MJ and KO respectively.
The closing inventory for both MJ and KO will be ________ units and ________ units
respectively.
A. 360 000 and 300 000
B. 300 000 and 237 500
C. 120 000 and 92 500
D. 0 and 32 500
E. None of the options
QUESTION 2
Use the following information to answer this question:
Earth (Pty) Ltd (“Earth”) produces and sells chicken products and is based in Bloemfontein
in the Free State province. Earth’s production process is recognised as a joint manufacturing
process, and the related joint production costs are allocated to the joint products based on
the net realisable value (NRV) at split-off point method. The company uses the direct
costing method, and all its inventory items are valued using the first-in-first-out (FIFO)
method. Earth has a 31 December 2023 financial year-end. The company operated for 30
days during January 2023.
The actual results for the month ended 31 January 2023 were as follows:
A total of 200 tons of broiler chickens were processed at the plant, this represents 90% of the
plant’s capacity. The actual yields at the split-off point were Chicken carcass 70%, Livers 25%
and Feathers 5%.
The actual variable costs incurred in the slaughtering process were as follows:
Description R/ton
Broiler chicken purchase price 4 000
, Water and electricity 200
Direct labour costs 400
Slaughtering processing 100
Additional information:
1. The chicken carcasses are treated with sodium nitrite to preserve the meat. Each ton
of chicken carcasses requires 50 kilograms of sodium nitrite, at R2,50 per kilogram of sodium
nitrite. The other total costs relating to the preservation processing were R250 000. The
preserved chicken was packaged at a total cost of R20 000. The addition of sodium nitrite and
the packaging do not increase the weight (tons) of the chicken. The selling price per ton of
Chicken was R60 000 in January 2023. The related selling and administration cost was 2,5%
of the selling price per ton.
2. The Livers were further cleaned and then preserved at a total cost of R345 000 during
January 2023. Livers are packed in hard containers and sealed at a cost of R600 per ton. The
cleaning, preserving, and packaging processes do not change the weight (tons) of the livers.
The actual selling price per ton of Livers in January 2023 was R20 000. The selling and
administration cost per ton was 5% of the selling price.
3. The Feathers do not undergo any further processing. The company sells Feathers to
Arts and Culture Centres at a selling price of R200 per ton. The Feathers are delivered at a
cost of R110 per ton. No other costs relating to the Feathers are incurred.
4. Total fixed selling and administration cost is R150 000.
5. There is no opening or closing inventory of any kind.
The total joint costs allocated to the joint products to be reflected in the actual statement of
profit or loss (income statement) for the month ended 31 January 2023 is ________.
A. R939 100
B. R1 089 100
C. R940 000
D. R941 100
E. None of the options
MAC3701
ASSIGNMENT 01 SEMESTER 01 2023
QUESTION 1
Use the following information to answer this question:
Neptune (Pty) Ltd (“Neptune”) manufactures and sells two types of energy drinks, namely:
The More-Joy (“MJ”) and Kick-On (“KO”). The following information is for the 2023 financial
year. Neptune’s financial statements are prepared using the absorption costing system,
valuing all its inventory items using the first-in-first-out (FIFO) method and having a 31
December financial year-end.
· The report from the storage manager indicated that there were 60 000 units (at R15
per unit) and 62 500 units (at R18 per unit) of MJ and KO respectively as closing inventory for
the financial year 2022.
· The budgeted selling prices are R20 and R25 per unit of MJ and KO respectively.
· The sales manager budgeted sales volumes for the 2023 financial year to be 300
000 and 270 000 units of MJ and KO respectively.
· The production manager stated that the 2023 budget production units for MJ should
be 6 times more than the 2022 closing inventory and for KO 480% of the 2022 closing
inventory.
· The total budgeted fixed costs for the 2023 financial year are reflected in the table
below:
Details R
Production line batch set-up cost 950 000
Rental of factory premises 750 000
Permanent manufacturing staff salaries 700 000
Depreciation of manufacturing machinery 400 000
Selling and administration 140 000
Total 2 940 000
· The fixed manufacturing overheads (“FMO”) are allocated to products based on the
machine hours it takes to produce each unit. It takes 15 machine minutes and 10 machine
minutes to produce a unit of MJ and KO respectively. It is budgeted that all manufacturing
overhead costs will be absorbed.
,· The variable costs per unit are R10 and R12 for MJ and KO respectively.
The closing inventory for both MJ and KO will be ________ units and ________ units
respectively.
A. 360 000 and 300 000
B. 300 000 and 237 500
C. 120 000 and 92 500
D. 0 and 32 500
E. None of the options
QUESTION 2
Use the following information to answer this question:
Earth (Pty) Ltd (“Earth”) produces and sells chicken products and is based in Bloemfontein
in the Free State province. Earth’s production process is recognised as a joint manufacturing
process, and the related joint production costs are allocated to the joint products based on
the net realisable value (NRV) at split-off point method. The company uses the direct
costing method, and all its inventory items are valued using the first-in-first-out (FIFO)
method. Earth has a 31 December 2023 financial year-end. The company operated for 30
days during January 2023.
The actual results for the month ended 31 January 2023 were as follows:
A total of 200 tons of broiler chickens were processed at the plant, this represents 90% of the
plant’s capacity. The actual yields at the split-off point were Chicken carcass 70%, Livers 25%
and Feathers 5%.
The actual variable costs incurred in the slaughtering process were as follows:
Description R/ton
Broiler chicken purchase price 4 000
, Water and electricity 200
Direct labour costs 400
Slaughtering processing 100
Additional information:
1. The chicken carcasses are treated with sodium nitrite to preserve the meat. Each ton
of chicken carcasses requires 50 kilograms of sodium nitrite, at R2,50 per kilogram of sodium
nitrite. The other total costs relating to the preservation processing were R250 000. The
preserved chicken was packaged at a total cost of R20 000. The addition of sodium nitrite and
the packaging do not increase the weight (tons) of the chicken. The selling price per ton of
Chicken was R60 000 in January 2023. The related selling and administration cost was 2,5%
of the selling price per ton.
2. The Livers were further cleaned and then preserved at a total cost of R345 000 during
January 2023. Livers are packed in hard containers and sealed at a cost of R600 per ton. The
cleaning, preserving, and packaging processes do not change the weight (tons) of the livers.
The actual selling price per ton of Livers in January 2023 was R20 000. The selling and
administration cost per ton was 5% of the selling price.
3. The Feathers do not undergo any further processing. The company sells Feathers to
Arts and Culture Centres at a selling price of R200 per ton. The Feathers are delivered at a
cost of R110 per ton. No other costs relating to the Feathers are incurred.
4. Total fixed selling and administration cost is R150 000.
5. There is no opening or closing inventory of any kind.
The total joint costs allocated to the joint products to be reflected in the actual statement of
profit or loss (income statement) for the month ended 31 January 2023 is ________.
A. R939 100
B. R1 089 100
C. R940 000
D. R941 100
E. None of the options
